Is the economy
turning the tide?

World Bank report projects fragile growth

Real GDP is projected to grow by 4.7 percent in 2025, driven by tentative reform momentum, a rebound in tourism and domestic consumption, and modest capital inflows, according to, according to ‘Turning the Tide?’ the latest World Bank Lebanon Economic Monitor (LEM). The economic outlook remains nonetheless shaped by a fragile stabilization in the political and security environment, and the unresolved financial crisis continues to impede large financial inflows and private investments.

Fragility
The World Bank cautioned that the economic outlook remains precarious, with political and security fragility, and a deep-rooted financial crisis continuing to deter large-scale investments and financial inflows.

In numbers
The report revised its 2024 GDP contraction estimate sharply downward to -7.1 percent, compared to a previous forecast of -5.7 percent in Fall 2024. This brings the cumulative real GDP decline since 2019 to nearly 40 percent.

Inflation is forecasted to ease to 15.2 percent in 2025, contingent on continued exchange rate stability and low global inflation. While improved revenue collection and a more balanced 2025 budget may enable modest increases in spending on essential public services, the report warns that Lebanon still faces intense fiscal pressure. Lasting stability, it says, will require broad-based structural reforms.
“Recent political developments brought a renewed momentum and offer an opportunity to address the fundamentals of Lebanon’s overlapping financial, economic, and institutional crises,” said Jean-Christophe Carret, World Bank Middle East Division Director. “By prioritizing actionable, high-impact measures, Lebanon can tackle critical issues and move toward sustainable recovery,” he said.

Inflation eases
The report highlights the limited direct impact of global trade disruptions on Lebanon, with major export markets representing only around four percent of its total goods exports. However, it notes that indirect effects—through shifts in global investment, inflation, and economic activity—remain uncertain and merit close monitoring.

Special focus is given to inflation patterns and exchange rate trends. The study finds that while inflation used to mirror global trends, it has since 2019 been largely driven by currency depreciation. The dollarization of the economy and a stabilized exchange rate could help contain inflation going forward, though it is expected to remain above global averages due to persistent domestic factors.

The report also examines why a sharply depreciated real effective exchange rate during the crisis failed to translate into export gains. Structural inefficiencies and entrenched dollarization, it explains, continue to stifle Lebanon’s export competitiveness.

One-year action plan
As part of its findings, the World Bank proposes a one-year action plan to support the government’s reform efforts. Drawing on decades of policy engagement in Lebanon, the plan outlines a series of high-impact, feasible steps aimed at restoring macroeconomic stability, rebuilding public trust, and laying the groundwork for a more resilient economic model.

The proposed measures, the report states, are designed to be implemented within the limited mandate of the current government and reflect both urgency and pragmatism in confronting Lebanon’s complex challenges.